Watered down

Looking down the barrel of a $3bn public deficit while his county’s sewer system crumbles around him, Nassau County’s Ed Mangano can’t be blamed for thinking the private sector might offer a warm bed for the night.

But being blamed he is, on all sides.

First it was the unions, then the public and now his political opponents, all standing in the way of a $750m plan which Mangano says will reduce the county’s debt and improve its wastewater infrastructure.

In May he announced that United Water would take over the long-term operation and maintenance of the county’s failing sewer authority in a partnership lasting between 30 and 40 years. A private concessionaire would pay $750m, $465m of which will be used by the county to pay down sewer-related debt and a further $250m which will be used to pay down general county debt.

In return, the county’s sewer revenues, estimated at $120m annually, will go to the financier over the term of the contract. The return on investment will come from the projected 30 to 40% operational cost savings United Water has said it will find through investing in new technology, streamlining operations and better managing energy use.

Mangano’s plan has already attracted the interest of 13 investors, but critics have called it a ‘Hail Mary’ pass to help him out of a very tight budgetary corner without raising taxes. There are also fears of possible rate hikes and job cuts among plant workers.

The private sector response so far has been simple: "We can do it better, [and] for less money than the county’s doing it".

And as part of one of the world’s largest water companies, it has a point.

United Water has serviced New York for nearly 120 years and currently provides water and wastewater services to more than 600,000 people throughout the state. It has run Indianapolis’ sewer and stormwater system under contract since 1994, saving the city $189m so far, according to the National Council for Public-Private Partnerships, and was contracted by Atlanta in 1999 to manage its water supply system in what then was the largest deal of its kind. Despite the deal collapsing in 2003 amid soaring costs, which underestimated the system’s state of disrepair, savings still came in at more than $16m.

Mangano has promised to preserve the sewage system’s 265 current workers and freeze rates for two years, linking them to consumer price index figures thereafter.

Once a ruler is run over the 13 investor proposals, the biggest obstacle will come from the Nassau County Interim Finance Authority (NIFA). In May NIFA, which seized control of the county’s finances last year and has final say over all county contracts totalling more than $25,000, unanimously rejected a $5m contract with investment giant Morgan Stanley to make the privatisation a reality.

NIFA director Christopher Wright has maintained the sewer deal is "not an innovative partnership [but] a very expensive loan".

Following the appointment of United in May, one news report claimed a copy of campaign group Food & Water Watch’s ‘United Water: Suez Environment’s Poor Record in the United States’, was circulating at each of Mangano’s public pitches.

In 2010, the same group published a report saying that nearly 40 US cities were considering privatising their water infrastructure, with budget deficits the main driver.

Whether the $3bn deficit in Nassau is making P3 a harder sell or not, it’s an issue that’s not going to disappear here or in any of the many other financially restrained municipalities in the US.